Executive Summary / Key Takeaways

• Procore is solidifying its position as the leading cloud-based platform for the massive, under-digitized construction industry, aiming to become the system of record by connecting all stakeholders across the project lifecycle.
• The company is executing a significant go-to-market evolution, shifting to a regional General Manager model and adding technical specialists, which is expected to cause near-term disruption (H1 2025) but drive more durable long-term growth and efficiency (H2 2025 and beyond).
• Despite macroeconomic uncertainty and potential tariff impacts, Procore demonstrated solid Q1 2025 performance with 15% revenue growth and improved non-GAAP operating margin to 10%, while maintaining conservative FY 2025 guidance of 12% revenue growth and 13-13.5% non-GAAP operating margin.
• Strategic investments in platform technology, particularly AI-powered agents leveraging Procore's unique dataset, and targeted acquisitions (like Novorender for BIM) are enhancing the platform's value proposition, aiming to deliver significant productivity gains and risk reduction for customers.
• Procore maintains a strong competitive position with high win rates against rivals, underpinned by its unified platform and customer-centric approach, while actively managing its capital allocation strategy to prioritize efficient growth and optimize free cash flow per share, including opportunistic share repurchases.

Building the Digital Foundation for Construction's Future

Procore Technologies, Inc. (PCOR) was founded over two decades ago with a clear mission: to connect everyone in construction on a global platform. This ambition positioned the company at the forefront of digitizing one of the world's largest and historically least technologically advanced industries. From its origins in California, Procore set out to provide a cloud-based construction management platform that would serve as the system of record for owners, general contractors, and specialty contractors alike. The core of its business model, centered on subscriptions priced by product mix and annual construction volume (ACV) with unlimited users, was designed to foster widespread adoption and collaboration across project teams. This foundational strategy has propelled Procore to become the leading global provider in its space, reaching over $1 billion in annual revenue in 2024 and setting its sights on becoming a multibillion-dollar enterprise.

The construction technology landscape is dynamic, populated by both broad enterprise software providers and more specialized players. Procore competes directly with companies like Autodesk (ADSK), Trimble (TRMB), and Oracle (ORCL), each with distinct strengths. Autodesk, a giant in design software, offers integrated design-to-construction workflows, while Trimble excels in hardware-software integration for field technologies. Oracle, with its Aconex platform, provides enterprise-grade financial and collaboration tools. Procore differentiates itself through its singular focus on construction and its truly unified, cloud-native platform that spans the entire project lifecycle. Management highlights consistently high win rates against its main competitors, including even higher rates against its largest rival, underscoring the perceived strength of its offering in competitive evaluations. While competitors may offer deep functionality in specific silos (e.g., ADSK in design, TRMB in field tracking hardware, ORCL in ERP integration), Procore's strength lies in connecting these disparate workflows and stakeholders on a single, user-friendly platform. This unified approach is a critical competitive moat, enabling seamless data flow and collaboration that siloed solutions struggle to replicate.

At the heart of Procore's differentiation is its technology platform, built from the ground up for the unique demands of construction. The cloud-based architecture provides real-time access to critical project information from any device, simplifying complex workflows and facilitating communication across the office and the field. This integrated approach offers tangible benefits to customers, driving productivity and efficiency. While specific, comprehensive quantitative metrics comparing Procore's technology benefits directly against all competitors across all use cases are not detailed, the company emphasizes that its platform enables customers to manage more construction volume per person and achieve measurable ROI by reducing rework, delays, and improving safety and financial transparency.

Procore continues to invest heavily in its platform and R&D to extend its technological lead. Recent initiatives include significant investments in AI capabilities, leveraging the company's extensive and unique construction dataset. The AI strategy focuses on developing "agents" that can automate tasks, provide actionable insights, and potentially replace manual processes. Examples include agents being piloted to monitor daily logs for completion, a seemingly simple task that, if missed, can expose contractors to significant risk. These AI agents are envisioned to monitor schedules and budgets 24/7, identifying emerging patterns and optimizing tasks, with the stated goal of driving meaningful productivity gains, reducing risk, and improving margins for customers.

Strategic acquisitions further bolster Procore's technological capabilities and market reach. The acquisition of Intelliwave Technologies in May 2024 enhanced the Resource Management solution, which helps customers track labor, equipment, and materials. The January 2025 acquisition of Novorender, a leader in BIM rendering technology, is aimed at enhancing Procore's capabilities for large-scale projects and deepening its BIM offerings, complementing earlier acquisitions like FlyPaper. These targeted acquisitions accelerate Procore's product roadmap and strengthen its platform's ability to serve diverse customer needs across the project lifecycle.

Performance and Strategic Evolution

Procore's recent financial performance reflects both its underlying growth momentum and the impact of strategic investments and external market conditions. For the three months ended March 31, 2025, the company reported revenue of $310.6 million, a 15% increase year-over-year. This growth was primarily driven by existing customers (approximately 83%), with new customers contributing the remaining portion. International revenue also saw solid growth, increasing 18% year-over-year (20% on a constant currency basis) and representing 15% of total revenue.

While revenue grew, the cost of revenue increased significantly by 42% year-over-year in Q1 2025, leading to a decrease in gross margin from 83% to 79%. This increase was attributed to higher personnel costs (salaries, stock-based compensation) driven by a 22% increase in cost of revenue headcount since March 31, 2024, as well as increased amortization of capitalized software development costs and third-party cloud hosting expenses necessary to support the growing customer base and platform.

Operating expenses also saw increases as the company invested for growth and executed its strategic initiatives. Sales and marketing expenses rose 15%, driven by personnel costs (reflecting a 10% headcount increase), professional fees, travel, and marketing events. Research and development expenses increased 24%, fueled by a 55% increase in R&D headcount since March 31, 2024, and higher professional fees and software expenses, underscoring the commitment to platform innovation. General and administrative expenses increased a more modest 9%, partially offset by reduced rent expense from lease modifications, while G&A headcount decreased slightly by 2%.

Despite the increased investments, Procore demonstrated profitability improvement on a non-GAAP basis, with the non-GAAP operating margin increasing quarter-over-quarter to 10% in Q1 2025. This follows a Q4 2024 where non-GAAP operating margin was negative 1%, attributed by management to accelerated investments from fiscal 2025 into fiscal 2024 and costs related to strong Q4 bookings performance. Management emphasizes that the Q4 2024 margin was not indicative of future expectations and that they are committed to continued margin expansion.

Key operational metrics provide further insight into the business's health. As of March 31, 2025, Procore had 17,306 total customers, a 4% increase year-over-year. More significantly, the number of customers contributing over $100,000 in annual recurring revenue (ARR) grew 14% year-over-year to 2,418, indicating continued success in attracting and growing larger customer relationships. The gross retention rate remained strong at 95%, demonstrating the stickiness of the platform within its customer base. Remaining Performance Obligations (RPO) totaled $1.3 billion, a 28% increase year-over-year, with current RPO (expected in the next 12 months) growing 20% to $842.6 million. Management noted that the cRPO growth benefited from longer contract durations, with the normalized growth rate in the mid-teens.

Financially, Procore maintains a solid liquidity position. As of March 31, 2025, cash, cash equivalents, and marketable securities totaled $698.8 million. The company generated $128 million in free cash flow in fiscal 2024, a significant 171% improvement year-over-year, and expects this trend to continue in 2025. Cash requirements are primarily for operating expenses, purchase obligations (like hosting services), lease obligations, and capital expenditures. Procore also funds strategic investments through acquisitions and has initiated a stock repurchase program, authorizing up to $300 million in October 2024. During Q1 2025, the company repurchased 1.45 million shares for $100 million, with $200 million remaining under the authorization. Optimizing free cash flow per share is a stated primary focus for driving shareholder value.

A major strategic undertaking currently underway is the acceleration of Procore's go-to-market operating model evolution, which began in Q3 2024. This involves transitioning from a matrixed structure to a General Manager model focused on specific regions (North America, Europe, Australia/New Zealand, Middle East) and areas like the Public Sector and Channel. The company is also introducing new technical roles to better support diverse buyer personas and drive adoption of the full platform value. Management acknowledges this transition is expected to cause near-term disruption to bookings, particularly in the first half of 2025, as teams adapt to new roles and processes. However, they have strong conviction that this evolution is necessary for scaling the business, building deeper customer relationships, improving efficiency, and positioning Procore to capitalize on the market when conditions improve. Hiring for these new GTM roles is ahead of schedule, with most expected to be filled by the end of Q1 2025.

Outlook and Risks

Procore's outlook for fiscal year 2025 reflects a balance of confidence in its strategic direction and platform value proposition, tempered by the anticipated disruption from the GTM transition and ongoing external uncertainties. For the second quarter of 2025, the company guided revenue between $310 million and $312 million, representing 9% to 10% year-over-year growth, with a non-GAAP operating margin expected between 11% and 11.5%.

For the full fiscal year 2025, Procore is maintaining the high end of its previously issued guidance, projecting revenue between $1.286 billion and $1.29 billion, representing 12% year-over-year growth. This guidance is described as conservative, designed to withstand a significant decline in the demand environment and viewed as a floor. The non-GAAP operating margin guidance for FY 2025 is maintained between 13% and 13.5%, implying a significant year-over-year expansion of 300 to 350 basis points. Management expects continued margin improvement in FY 2025 and into FY 2026, with long-term targets of 25% free cash flow margins in the medium term and 40% in the long term, potentially achievable faster in a prolonged slower growth environment.

The outlook is subject to several key risks. The macroeconomic environment remains challenging and mixed, with cautious customer spending and pricing sensitivity influenced by factors like elevated inflation, higher interest rates, and recession risk. Uncertainty surrounding potential tariff policies adds another layer of complexity, as significant increases in material costs could lead to project delays or cancellations, although management notes no material change in customer behavior so far and the potential for long-term tailwinds from reindustrialization. The ongoing GTM transition is expected to cause near-term disruption to bookings and revenue growth, particularly in the first half of 2025, and successful implementation is critical for realizing the anticipated long-term benefits. While Procore has demonstrated a history of balancing growth and margin in challenging times, its accumulated deficit of $1.3 billion as of March 31, 2025, highlights the need to continue progressing towards profitability.

Conclusion

Procore is executing a strategic evolution aimed at solidifying its leadership and capturing the vast, under-digitized construction market opportunity. The company's unified cloud platform, enhanced by targeted acquisitions and significant investments in AI, provides a compelling value proposition centered on driving productivity and managing risk for customers across all stakeholder types. While the accelerated go-to-market transition is expected to create near-term disruption and external macroeconomic factors pose ongoing challenges, Procore's Q1 2025 performance and conservative FY 2025 guidance demonstrate resilience. The commitment to continued margin expansion and optimizing free cash flow per share, coupled with a strong competitive position and a clear long-term vision, positions Procore to emerge stronger from the current environment and build upon its foundation as the digital operating system for the future of construction.